New report says Apple-Beats deal was close to falling apart, but is still on

By , May 22, 2014

Apple Beats

It’s been two weeks since we first received word that Apple was looking to acquire Beats Electronics, and we still haven’t heard a peep about the sale from either company. Some folks have taken the silence as a sign talks had broken down, but a new report says that’s not the case.

According to TechCrunch, sources with knowledge of the deal say that Apple’s planned multi-billion dollar acquisition of headphone maker Beats will go through. The outlet does note, however, that negotiations have been bumpy and close to falling apart on multiple occasions…

Here’s TechCrunch’s John Biggs with the scoop:

A well-placed source has confirmed rumors that Apple’s acquisition of Beats “is happening” but was close to falling apart multiple times. The source said with “70% certainty” that Apple’s planned multi-billion acquisition of headphone maker Beats will go through. […]

Rumors in Asia also point to previous moves by Samsung to buy the Beats brand, a deal that fell through “earlier in the year.” Apple’s efforts, it seems, will bear more fruit. “The deal hasn’t fallen apart yet,” the source said.

A second report from TechCrunch, this time by Josh Constine, aims to shed a little more light on Apple’s reasoning behind the rumored buyout. Again citing sources familiar with the deal, the writer says it’s about helping facilitate the iTunes transition from digital downloads to streaming.

But according to a source with direct knowledge of iTunes’ executive strategy, by buying and operating an external streaming service like Beats, Apple can coin off a smooth transition without cratering the record business. The record labels and artists depend on the approximately $1 billion iTunes earns them selling downloads each year which could be disrupted if the 800-million account store shifted to subscription streaming.

In short, turning iTunes into a streaming-only service is frightening to an industry fast losing cash to streaming upstarts and — by maintaining iTunes as an album/a la carte music sales service while running Beats as a sideline — the company can have it both ways. 

Both reports add that Apple is also largely interested in bringing Beats co-founders Dr. Dre and Jimmy Iovine on as executives. The pair offer cool marketing savvy and several decades of experience in the music industry, and would fit in with the company’s otherculturally aware‘ hires.

Again, neither company has confirmed or denied the acquisition rumor yet, but Dr. Dre seems to think it’s a done deal. Earlier this month, the Beats executive was seen in a video celebrating becoming ‘hip hop’s first billionaire.’ A $3.2 billion buyout would reportedly net Dre $800 million.

For more theories on what Apple could want with Beats Electronics, click here.

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  • XboxOne

    Did dr.dre want more money? His greediness slowed it down I bet.

    • CollegiateLad

      Do you actually believe these ‘reports’? Lol…

  • Merman123

    Beats me…. Get it?

    • Jad Boukai

      Ha! I get it, its cause beats are tasty… right?

  • oralarts

    Assuming that $1 billion in downloads number is correct, I think it’s important to add some relevant context.

    Spotify just announced that they now have 40 million streaming customers. Prior to reaching that number, they paid out $500 million in royalties in 2013 alone. If Apple were to integrate streaming into iOS, how long do you think it would take them to eclipse $1 billion a year in royalties paid out?

    • sabbadoo32

      I read that as $1 billion in royalties paid to record companies and artists. I think you’re on the right track, but the numbers are even higher for Apple.

  • sabbadoo32

    The idea that iTunes would be a stream-only service is laughable. People will always want to own they love. The hacks want you to think that EVERYONE will stream everything and want to own nothing. The realists never forget that people like to own things.

    They don’t need to own every song they hear. Which is why they called it radio back then and why they call it streaming today. Either way, it allowed people to browse, choose, and buy what they really like.

    Pandora publicizes the millions of listener hours in a given quarter; but unless they raise rates, they will always be a low-profit player. As it increases in popularity, royalty pressure will rise from artists as much as profit pressure from shareholders. Spotify will face the same pressures if it goes public.

    Once monthly prices reach $10, consumers will make a decision. “If I’m paying the equivalent of one album on iTunes or two albums on eMusic to listen to a sliver of the music offered by streamers; why don’t I just buy the tracks or album and listen to it on (instead of streaming it from) my device?

    With Pandora One already at $6/month, it won’t be long before this day will come.

    • Rowan09

      I think the article said iTunes will stay as is and Beats would be the streaming service, so it would be the best of both world.

      • sabbadoo32

        I agree. I was responding to the snippet about transitioning iTunes into a streaming service. I would imagine that the Beats guys would promote the value of their service as the very future of iTunes.

      • Jad Boukai

        I feel like they should offer a streaming service though in addition to the current model. That way, the iTunes Streaming Service would be cheaper than the competition, but still allow you to purchase songs to keep. Unless, do some streaming services already do that?

      • sabbadoo32

        iTunes Radio. Pretty good. No discount to buy, though. With iTunes Match, you can replicate your iTunes music collection in the cloud and play it on any device as well.

  • Mark

    I can’t believe people pay for music still. For years the record industry ripped people off blind by forcing the purchase of a 17 dollar cd in which we only wanted 1 or two songs. Screw them. Piratebay forever, downloading from YouTube forever. Sorry for the small guys but if you’re in music to make money you’re better off being homeless. Screw the industry. They did this to themselves. Took forever to adjust to the digital age and look what happened. If it wasn’t for itunes they record label industry would have been gone by now. F them.

  • Hyr3m

    iTunes is not a music sales service. You don’t own the music, you purchase a right to access it until they decide you can’t anymore.

  • mav3rick

    Another struggle to get an iService to actually work…